02067cam a22002297 4500001000600000003000500006005001700011008004100028100002000069245010400089260006600193490004100259500001900300520115800319530006101477538007201538538003601610710004201646830007601688856003701764856003601801w1044NBER20150303154259.0150303s1982 mau||||fs|||| 000 0 eng d1 aTaylor, John B.14aThe Role of Expectations in the Choice of Monetary Policyh[electronic resource] /cJohn B. Taylor. aCambridge, Mass.bNational Bureau of Economic Researchc1982.1 aNBER working paper seriesvno. w1044 aDecember 1982.3 aThis paper reviews and contrasts different views about the role of expectations in policy research and practice. Recently, two widely different views seem to have dominated the analysis of policy questions.One view, which is referred to as the "new classical macroeconomic"view, is that expectations overwhelm the influence of monetary policy.The other view, which is referred to as the "Keynesian" macroeconomic view, is that expectations are unimportant because people do not adjust to expectations of policy change. The paper argues that both these views are misleading. It advances a new view of the role of expectations that is still emerging from current macroeconomic reearch. The new view recognizes the importance of contractual arrangements which prevent a modern economy from adjusting instantaneously to policy changes, even if they are expected. But it also emphasizes that forward-looking expectations influence how these arrangements are set up and how they evolve over time. Recent criticisms of this new view are reviewed, and examples are given to illustrate how quantitative methods that incorporate this view can be used in practice. aHardcopy version available to institutional subscribers. aSystem requirements: Adobe [Acrobat] Reader required for PDF files. aMode of access: World Wide Web.2 aNational Bureau of Economic Research. 0aWorking Paper Series (National Bureau of Economic Research)vno. w1044.4 uhttp://www.nber.org/papers/w104441uhttp://dx.doi.org/10.3386/w1044